Newly leaked texts suggest regulator knew rate hike was inappropriate

More evidence emerged on Friday that Ohioans have faced questionable utility increases for years that were granted on perhaps dubious grounds.

On June 19, 2019, FirstEnergy executives were furiously pushing what would later be called one of the biggest corruption and money laundering schemes in Ohio history. That same day, the Ohio Supreme Court struck down a steep rate increase the Ohio Public Utilities Commission had granted to FirstEnergy three years earlier, saying it was illegal.

In reference to the decision, Michael Dowling, then Vice President of FirstEnergy, exchanged texts with Asim Haque, who until several months earlier was chairman of PUCO, the entity that regulates monopoly utilities such as FirstEnergy.

One of Haque’s posts suggests he knew a rate increase he voted to allow FirstEnergy to implement was illegal, but that the Akron-based utility would be allowed to keep the $460 million. dollars he had already collected.

“And knowing that it would likely be deemed illegal and not refundable, I knew you would keep the funds,” Haque wrote in the text, which was first reported by Eye on Ohio and Energy News Network.

The press organizations received the texts as part of a request for recordings. The Office of Ohio Consumer Counsel, the state’s official watchdog, got the messages first. He provided copies to Capital Journal as part of a separate request.

In an email, Haque said he was only joking.

“My text exchange with Mike Dowling was ironic based on my previous controversial interactions with him and the company,” he said. “You’ll see at the bottom of the text message(s) that I say I’m kidding. FirstEnergy was not a fan of mine, and the idea of ​​me being pictured in the hallways of their Akron headquarters would have been particularly absurd.

The last part was a reference to a separate text in which Haque told Dowling that he “was the regulator that bothered you the most” but due to the tariff increase supported by Haque, “I should have a little picture remembered in these hallowed halls of Akron.”

However, it’s hard to see comments supporting a likely illegal, non-refundable rate increase as a joke, said Rob Kelter, an attorney with the Environmental Law and Policy Center, who has opposed numerous demands. revenue from FirstEnergy.

“It’s one thing to joke about your picture being in the hallowed halls of Akron and he was joking,” Kelter said Friday. “But in terms of that key comment that he knew would probably be ruled illegal, that he couldn’t get a refund? This is unacceptable.

In a regulatory filing, the consumer attorney said something similar.

“Unfortunately, we learned from (text messages) from FirstEnergy that it was apparently known within PUCO that the (rate increases) would likely be deemed illegal and that even so, FirstEnergy may retain the funds because they do not could not be refunded. to consumers. »

FirstEnergy spokeswoman Jennifer Young said in an email that she could not comment due to ongoing litigation.

To justify his support for the increase, Haque, the former regulator, said FirstEnergy had asked for one worth $4.5 billion, while the one he supported was worth much less. He added, “It was first and foremost a sensible decision and it was fair to Ohio consumers, as I explained in my assent to the decision…”

The Supreme Court, however, disagreed, and subsequent investigations into the increase raise further questions.

Called the “distribution modernization addendum”, this increase was supposed to raise funds to modernize the electricity network. But the ordinance that authorized it did not place many restrictions on how the money could be spent.

He said upgrading the network could be expensive and the funds could be used to pay for it directly. But then he added that FirstEnergy could use the huge new prize pool to support grid modernization “indirectly”.

We “acknowledge that the (affiliates) and FirstEnergy Corp. can use Rider DMR revenues to indirectly support network modernization investments…”, indicates the file authorizing the rate increase. “These measures are expected to reduce the cost of borrowing funds needed to invest in network modernization and may include reducing ongoing pension obligations, reducing debt or taking other measures to reduce long-term costs. term of access to capital.”

It is not even clear that FirstEnergy did this. He placed some of the funds in a pool from which utilities the company owned in other states could borrow. And a subsequent audit found that FirstEnergy hadn’t tracked the money from the rate increase, so it’s impossible to say how it was spent.

And, as the PUCO has not incorporated a reimbursement mechanism, the 460 million dollars of FirstEnergy collected thanks to the increase in tariffs are part of $1.5 billion collected from illegal but non-reimbursable utility hikes granted by PUCO since 2009.

By not incorporating a reimbursement mechanism, the PUCO said it was not trying to protect consumers, but monopolistic utilities. Making rate increases “subject to reimbursement would be counterproductive and impose additional risks on the Companies,” PUCO wrote in an order.

Kelter, of the Environmental Policy Law Center, said he could only partially believe Haque’s claim that he was joking with Dowling the day the Supreme Court struck down the rate hike.

“You can give Chairman Haque the benefit of the doubt that some of this was a joke,” Kelter said. “But not the part about what he did for them in terms of getting them the money knowing their order was likely to be canceled – doing it anyway so they could collect the money for a few years in the interval.”

In the same post, Haque, an appointee of former Governor John Kasich, hinted at worse things to come.

Haque concluded the text by saying, “It’s up to President Randazzo now to find a way for you.”

It was a reference to Sam Randazzo, the nomination of current Gov. Mike DeWine as president of PUCO. Randazzo later quit after the FBI searched his Columbus condo amid revelations that FirstEnergy paid him more than $4 million just before he became the state’s top utility regulator. It was part of the $22 million the utility had paid out to Randazzo-controlled entities over the years.

While supposed to regulate utilities, FirstEnergy said Randazzo played a role in drafting House Bill 6which federal investigators said FirstEnergy and its associates corruptly plowed $61 million in its stint and received a $1.3 billion taxpayer bailout in return.

Former Ohio House president Larry Householder, R-Glenford and four associates have been charged in the case. Dowling and Randazzo have not been charged and deny wrongdoing.

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